The figure page is intended to give an overview of the audit process. The entity is presented as a grey background. It can have wider objectives than those included in the audit objectives for financial auditing, which are shown in blue. This symbolises that not all the entity’s goals are necessarily relevant for financial auditing.

 

In the figure the audit objectives have been drawn to reach farther down than the entity. The OAG reports to the Storting, and the reporting in the audit process reduces communication with the entity.

Risk is here defined as the possibility of the entity not achieving its goals, and in the figure it is represented by the dark-red area. The fact that the red area becomes narrower symbolises that auditors eliminate risk through risk analyses and audit procedures.

The risk analyses are conducted using a top-bottom approach. They start at strategic level and gradually become more detailed. The purpose is to direct the auditing work towards risk that is identified at a general level. Risk at this level usually has the greatest consequence for the entity and is therefore of most interest to auditors and users.

The assessment of risk is made in three phases: strategic analysis, process analysis and analysis of residual risk.

In the strategic analysis auditors assess the entity’s external factors and internal factors that are of a general nature that can influence the extent to which the entity achieves it goals. On the basis of this, auditors assess risk elements at a general level.

In the process analysis auditors identify risk elements in the processes and assess whether the established control measures have a risk-reducing effect. After the process analysis, auditors are left with residual risk.

To determine the scope of the procedures that are to be implemented to achieve an acceptable level of audit risk, in their analysis of residual risk auditors must assess and compare residual risk with audit risk.

The figure shows that we conduct audit procedures and collect audit evidence at all levels throughout the audit process. The character of the audit procedures and the strength of the audit evidence gradually changes as auditors proceed more deeply into the audit or downwards in the audit process shown in figure 1. To ensure that the conclusions are based on correct information, auditors must verify that evidence that is collected during the year is still valid at 31 December. In the figure this is symbolised by a narrow strip of audit objectives and audit procedures that extend to the edge of the audit evidence field.